[If you've just joined, this is the last part of the original article on the demise of a start-up and lessons learned that are applicable to a wide range of businesses which I published three years ago. I will include new perspective gained since on this personal 'case study' in a follow-up post. Here's where you can read Part 1, Part 2 and Part 3.]
Here are the most significant lessons I learned from my SmallBiz experience:
1. Responsibility and Accountability. Lessons in personal responsibility and accountability abound for everyone involved. Although it is all too easy to interpret the founders’ blaming the company demise on market timing as shifting accountability, it has taken time to realize the same shift in myself in laying blame on the founders. This has been the most profound and difficult lesson of all, one I’m still working out on a personal level. One example: although I would always state my own opinions, when others disagreed, I would usually defer, thinking, “I’ve never run a successful start-up before; these guys have.”
2. Employees. Hiring and firing were treated too casually. Start-ups must hire A-players who are highly adaptable, self-motivated and can wear multiple hats. Hiring specialists or novices at an early stage is risky. Just as necessary are people with diverse viewpoints who will speak up for the best interests of the company as a whole—even if it challenges the management team. Start-ups in particular can ill afford blind loyalty.
3. Planning. On one hand, companies—and especially start-ups—cannot afford “analysis paralysis” or too much emphasis on long, drawn-out plans. But that doesn’t mean planning should go out the window, either. It was a fatal mistake for SmallBiz to seek and receive seed funding without a full business plan to implement and execute against. A plan is a living document and is not forever set in stone, but we had none. The ship was set afloat without a definite direction and with hastily gathered provisions and crew.
We spent too many precious resources and time backtracking and retrenching operations and implementation as the business model and plan unfolded simultaneously. Ideally, the business model and plan would have been more developed before aggressive implementation began. Having a written plan provides clarity and focus that are sorely needed because of the limited resources a start-up has.
4. Customers. SmallBiz never really had many customers, which on one hand may not be too surprising, since we never got to a full launch stage. One thing I would definitely do differently (related to lesson 3 above) is to solicit potential customer feedback in order to make decisions about the business model, the product’s proposed features and priority of those features, pricing, and many other components of the business plan. We were trying to make decisions “for our customers”—as if we knew better than they did.
Granted, many of us were e-commerce experts with first-hand customer experience from previous companies, but this was a new model and a new target market. Having alpha or beta customers lined up that were also contributing to the development of the product early on would have helped us hone our model much sooner and have helped meet an all-important milestone—having customers committed to buy. Talking to customers early would have alerted us sooner to some of the psychological reasons that customers resist the ASP model—such as loss of control over their data, relinquishing control in general of their IT operations to an unknown entity, security and privacy concerns, among others.
5. Winning. As mentioned in the story, a focus on what one has at stake to lose and picturing the failure of the company does not make for a motivating vision. A clear vision is an important step towards manifestation. One should be cognizant that any start-up is walking a fine line, and needs to be cautious with resources. But the vision that propels the company and the individuals involved must be framed positively in order to remain committed and confident—and ultimately, to succeed. Would you rather focus on winning or focus on avoiding failure?
6. Trust. Direct, honest communication between the management team floundered in the last few months at SmallBiz. It was a situation that seriously needed to be resolved in order for us to move forward. The situation degraded swiftly—much more rapidly than in a larger, more stable operation. An outside facilitator would possibly have been the ticket to opening the lines of communication.
In addition, an attitude of mistrust for and independence from “outsiders”—potential partners, board of directors, advisors, basically anyone outside SmallBiz—persisted in the company all along. In my view, this was also unhealthy, as many of these external organizations or individuals had reason to see us succeed—win-win alliances can be very powerful. Ultimately, lack of trust and honest communication nailed the coffin.
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